Probate and Estates

Jansen Walsh & Grace is here to help you if you are recently bereaved to start to deal with your loved one’s affairs.

We understand that a bereavement can be a distressing experience. You may not wish to face the legal formalities of administering the estate of your loved one on your own.

We are here to help during this stressful and anxious time, providing you with the support you need.

We provide guidance, support and assistance with the probate process — depending on whether or not there is a valid Will — and administering the deceased's estate.

If you are in a hospital, or incapacitated, or in a retirement village, we can visit you.

Special OfferFocussing on the practical issues you never had to deal with before, if you are a widow, a widower or the surviving domestic partner, we offer a free no-obligation 20 minute appointment, by appointment, where you can come as a first point of contact when your loved one has died.

Have you been appointed as an Executor of an estate?

Are you not sure what is required of an Executor?

We understand that this is a difficult time for you and our firm is experienced in this area. We are equipped to assist you in obtaining a grant of probate or letters of administration. We see to the gathering in of the deceased's assets (as well as real estate) and then attending to the ultimate distribution of the estate to the beneficiaries. We will attend to preparation of all documents, liaise with banks and financial institutions, superannuation companies, real estate agents and all other organisations in order to gather in all the assets of the estate. We take care of it all.

We also understand that these times are very upsetting and that emotions can run high.

Managing the expectations of the beneficiaries can cause unnecessary stress.

If you are an executor and there are other beneficiaries in the estate, the other beneficiaries may come and pester you and say that they want their legacies and distributions before the 6 months’ period have expired — exposing you to risk.

We are here to ensure that you have appropriate support and we will always be close at hand to assist you.

"Do I need probate"An application to the Supreme Court for a grant of probate or letters of administration can be expensive. You do not usually need a grant of representation:

if there is real property, but the deceased held it as joint registered proprietor;

for assets in a superannuation fund;

for assets held in a family trust or a unit trust or a hybrid trust;

for most assets valued at less than $50,000.

You will require a grant of representation if:

there is real property (other than held as joint registered proprietor);

there is an accommodation bond;

there is a lease or licence of a unit in a retirement village;

there are term deposits or bank accounts with a value of $50,000 or more.

If the value of the assets of the estate is $107,160 or less, the Supreme Court will prepare a grant of representation for the fee of $118.50.

Unfortunately, the value of most estates exceeds this.

Supreme Court probate fees increaseCurrently, you have to pay up to $2,051.90 to the Supreme Court of Victoria to obtain a grant. The precise fee will vary on the size of the estate. The good news is that the application fee for estates less than $1 million will decrease to $60.70.

There can be no doubt that to burden larger estates with a significantly larger fee is simply unfair. For most widows and widowers in this situation, their property or the accommodation bond or other estate assets are often their primary asset and they may have little cash to pay for higher probate fees. What’s more, this fee increase may have serious implications for a particularly vulnerable section of society.

“Who is an executor?”

An executor is a person who has been appointed in a will to manage the deceased’s estate and carry out the deceased’s wishes set out in the will after she or he has died.

“What is 'an estate'?”

An estate is all of the property and liabilities of a person in existence after her or his death.

There are some assets that do not form part of the deceased’s estate after his or her death.

The most common examples are:

property owned jointly with another person (not as tenants in common). In this instance, the deceased’s share of the property passes to the other owner automatically on the deceased’s death;

superannuation and life insurance proceeds that are paid directly from the fund to a superannuation/life insurance beneficiary (and not to the estate);

undistributed assets of a family trust.

"Who is a beneficiary?”

A beneficiary is any person or entity (such as a charity) that receives a gift or benefit from a person’s estate.

"What is the role of an executor?”

The role of the executor is to carry out the wishes of the deceased as specified in the will. This is a position of great trust and must be carried out with care and honesty.

The executor must act in the best interests of the estate and all of the beneficiaries and cannot act in his or her own interests if they are not the same as those of the estate and the beneficiaries. The executor’s role is often referred to as a trustee or fiduciary role. If, for example, the executor wanted to buy something from the estate, he or she would need to ensure that there was an appropriate valuation of the item and also obtain consent from all of the adult beneficiaries.

The executor is responsible for managing and protecting all of the assets of the estate until they are distributed to the beneficiaries. He or she is also responsible for ensuring that all of the liabilities of the estate are paid where appropriate.

Where there is more than one executor they should consult with each other and agree on a course of action.

Executors should keep full and accurate records of how the estate has been managed and distributed and should provide a summary of the financial transactions for the estate to the beneficiaries.

If a conflict arises, an executor cannot take sides with one or more beneficiaries. The executor should try to mediate a resolution to the conflict. Communicating regularly with the beneficiaries about what is happening with the estate is a good way of minimising misunderstandings and conflict. This is especially so as the family and friends of the deceased are coming to terms with their loss and will need caring and clear communication about what is happening.

It is possible for assets to be distributed other than as set out in the will.

The executor must inform all beneficiaries and obtain consent from all adult beneficiaries to the change, preferably in writing (and preferably after each beneficiary has had the opportunity to seek independent legal advice).

“Must an executor take on the responsibility?”

An executor can refuse to accept the position of executor, but this should preferably be done before probate is granted. If the executor seeks to step down from that position after Probate is granted, they must obtain the consent of the Supreme Court.

Executors can delegate some of the actions and responsibilities to others, for example, funeral directors, lawyers, accountants and real estate agents. The executor will be ultimately responsible for the actions of those people.

“Who arranges the funeral?”

The executor is responsible for making the funeral arrangements if the deceased has not already made those arrangements. The executor should follow any directions left by the deceased as to the funeral arrangements but is not bound to do so. Things to consider include:

whether the body is to be buried or cremated;

if the body is to be buried, where;

if the body is to be cremated, whether the ashes are to be scattered or retained;

the nature and format of the funeral service;

who they should notify about the service.

If the executor is not an immediate family member, then the executor should consult with the family about the funeral arrangements.

The reasonable cost of the funeral is an expense of the estate, but the executor should be careful not to incur expenses beyond the available funds in the estate.

“What happens to the bodily remains?”

The executor may be asked whether organs can be donated. This usually occurs where the deceased has registered with the organ donation register or there is a request by the hospital or the next of kin. The decision is usually left to the next of kin.

“Should there be a reading of the will?”

It is not usual to have a formal reading of the will. Usually the beneficiaries are notified of their interest by the executor or the firm of solicitors appointed by the executor.

In Victoria, various categories of people are entitled to request a copy of a will if it was made on or after 20 July 1998:

any person named or referred to in the will, whether as beneficiary or not;

any person named or referred to in any earlier will as a beneficiary;

any spouse of the deceased at the date of the deceased’s death;

any domestic partner of the deceased;

any parent, guardian or children of the deceased;

any person who would be entitled to a share of the estate if the deceased had died without leaving a will;

any parent or guardian of a minor referred to in the will or who would be entitled to a share of the estate of the deceased if the deceased had died without leaving a will; and

any creditor or other person who has a claim at law or in equity against the estate of the deceased and who produces evidence of that claim.

A beneficiary has no legal right to see a will of a deceased person made before 20 July 1998. However, once probate is granted, a copy may be obtained from the Supreme Court.

It is usually appropriate and good practice for the executor, or the firm of lawyers appointed by the executor, to write to the beneficiaries and tell them they are beneficiaries under the will as soon as possible.

“What should the beneficiaries be told?”

There is no legal obligation for beneficiaries to be told that they are beneficiaries before the gifts in the will are given to them. A beneficiary is entitled to receive a copy of the will upon request as set out under the heading “Should there be a reading of the will?”

This can often be a very emotional and confusing time for beneficiaries and open, honest and regular communication with beneficiaries is often the best way to minimise any difficulties that may arise. Failing to be open and honest in dealing with beneficiaries can lead to distrust and conflict later.

An executor may often instruct us to notify the beneficiaries of their entitlement and where necessary, communicate with beneficiaries as to the progress of the administration of the estate. Alternatively, they may choose to do so themselves.

Administration

“What should be done with the assets and liabilities of the estate?”

As executor, you are responsible for the safekeeping of the assets of the estate. You should:

make an itemised list of all of the assets as soon as possible, including a description of their condition and where they are stored (if necessary). Using a video recorder or camera may be a good method of recording what household items exist;

digital assets should also be considered, such as photographs and documents stored digitally;

ensure that property such as houses, buildings, boats and cars have current and adequate insurance. Consider whether the insurer needs to be notified because of any change i.e. the house is vacant or the vehicle is housed elsewhere;

ensure that items of dollar or sentimental value such as jewellery, photographs, paintings etc are adequately secured;

consider whether the locks to houses and buildings need to be changed;

Consideration should be given to what to do with all household items. Some items may be given to the beneficiaries in part satisfaction of their interest in the estate, some may be sold to second-hand dealers or given to charities or otherwise disposed of. Care must be taken in making these choices. Many executors consult with the family of the deceased before making these decisions.

Executors have an obligation to ensure that assets are not wasted and do not diminish in value. If money is collected from the sale of assets and is not to be distributed straight away, it needs to be invested. If real property is to be held for some time, consideration should be given to whether it should be rented.

In some instances, professional valuations will be needed if beneficiaries are given items. Alternatively, the value may be agreed upon by the executors and beneficiaries.

The executor should also ensure that all liabilities of the estate are accounted for. This may include the usual household accounts such as telephone accounts and credit card bills but will also include other liabilities, such as income tax.

“What if there is no will?”

If there is no will the next of kin of the deceased usually has to apply to the Supreme Court for a document called “Letters of Administration”. This document is the court’s formal approval for someone to administer the estate of the deceased, effectively acting in the same role as an executor, but called an administrator. Approval is usually granted in favour of a family member or another person who has a substantial interest in the estate.

“What is probate and why do I need to apply for it?”

Probate is an authority granted by a Supreme Court (usually it would be the Supreme Court of Victoria where there is property in Victoria) that confirms the validity of the will and the appointment of the executor to look after the estate of the deceased.

There is an application fee to file for probate which is increased annually on 1 July.

Before applying for probate, the executor (or this firm) must advertise the fact that an application for probate is to be made. This advertisement is usually posted on the Supreme Court’s website and must be placed at least 14 days before the probate application is lodged with the court.

An application for probate requires the preparation and filing of various documents with the Court, including:

a Statement of Assets and Liabilities with appropriate valuations. This often takes some time to prepare as information needs to be obtained from the banks, companies in which the deceased held shares, superannuation funds, etc. It can take up to 6 weeks to receive a response from all of these institutions and formal valuations of real estate or antique items may be necessary;

a certified copy of the death certificate;

the original will;

your affidavit setting out background information about the deceased, the will and financial position of the estate (you make your affidavit in the presence of an authorised witness and it has the same importance as evidence given under oath in court);

an affidavit exhibiting a copy of the advertisement required and a statement about what searches have been made to ascertain the existence of any prior grants of probate or administration in relation to the deceased’s estate.

Probate is necessary to give you the right to deal with certain assets such as real estate and money in bank accounts. Real estate cannot be transferred unless probate is obtained (except to a surviving joint proprietor). Most banks will not allow the executor to deal with money in the deceased’s bank accounts where the balance is above a certain amount (usually $50,000) unless probate has been granted (although banks will usually allow access to funds for the payment of the funeral account).

There are some estates that are small and do not contain real estate (for example, because it is transferred to a surviving joint proprietor) and in these cases probate may not be required.

“How long does it take?”

“Mum died in November and it is now January and the executor has not yet paid me my share of Mum’s estate. I promised my kids I would give them part of my money at Christmas. Why is it taking the executor so long to give me my money?”

The time it takes to finalise an estate depends on what must be done and how long it takes for each step to be completed.

Obtaining a grant of probate is governed by the Administration and Probate Act and the rules of the Supreme Court. Unless you plan to get a few of your friends together, provide them with machine-guns and follow the example set by Lenin and Trotsky in Petrograd in 1917 by seizing Parliament House in Spring Street, those rules and time limits must be complied with.

First, you have to wait for the death certificate. Although the time for issuing a death certificate is about a week, the death must first be registered before the Registry of Births, Deaths and Marriages can issue a death certificate. This requires formal notification to be submitted to the Registry by the person responsible for organising the disposal of the remains (usually the funeral director) and the relevant medical practitioner. This can take up to 10 weeks. The alternative is proof by the effluxion of time, as occurred with the death of Michael Rockefeller, a scion of the wealthy Rockefeller dynasty, whose body was never found but who is believed to have been killed and eaten by cannibals in Netherlands New Guinea.

Next you must wait until the prescribed period of 14 days have expired after advertising before you can apply for a grant of probate.

The documents must be drafted. These are complex documents and have to be drafted with care. It usually takes most of a day to draft them. One of the most-time consuming tasks we have is trying track down the present whereabouts of each witness. This can often take us weeks. Sometimes we cannot even decipher the name of the witness.

You must then allow up to 6 weeks before probate is granted as the Registrar of Probates has to carefully examine the application. Sometimes it is quicker, but there is no guarantee. It takes even longer if the Registrar of Probates is concerned about any aspect of the will (for example, the witnesses did not sign the bottom of each page or the deceased had dementia at the time of death and made the will not long before the deceased died).

We are always reluctant at this early stage to contact the office of the Registrar of Probates complaining about the delay as there is a risk that this might motivate the officer to put the file at the bottom of the pile.

Once we get the grant, it takes 4 to 8 weeks to receive the monies from the banks and financial institutions. Indeed, last year we had difficulties with AMP, Asgard and OnePath. Each sat on the executors’ signed applications for months and months and ignored our repeated letters. There was no reason for the delay (eg, the form not being signed correctly). They were happy to take the money from the deceased but were a lot slower in returning it!

“Is there anything I can do to make it quicker?”

If there is any urgency about the matter, one can make an application to a judge of the Supreme Court for a grant ad colligendum bona. This is a temporary grant to undertake special tasks pending the grant of probate by the Registrar of Probates. This costs about $16,000. Please let us know if this is what you require. It only applies in cases of genuine urgency in the administration of the estate.

You can help speed the process up by providing:

the death certificate;

a list of assets and liabilities;

the place and date of birth of the deceased;

the names of the witnesses (if their names are neither typed nor written in clear handwriting);

the current addresses of the witnesses (if known to you);

your date of birth;

your current occupation;

the current addresses of any non-proving executors;

the current addresses of each of the beneficiaries.

“How long do estates take to finalise?”

It is prudent for all of the estate’s liabilities to be paid before the estate is finalised. See the heading “Is there tax to be paid?”

It would be most unwise to distribute assets until the expiration of 6 months from the date of the grant of probate without first obtaining legal advice. That is to protect you, the executor, if any claims are made. See the discussion under the heading “Can anyone claim more?”. If you do so, and a claim is subsequently made on the estate, there is a risk you might have to pay the award from your own pocket. As Sir Harry Vaisey, a judge in the Chancery Division of the High Court of Justice in England, explained:

"I wish to be distinctly understood — I have said it before and I say it again, and I hope some notice will be taken of it — that where an application under the Inheritance (Family Provision) Act 1938 is either pending or impending, that is to say, during the first six months after grant of representation, if it is a case in which there is any risk of such a thing happening, the executor distributes the estate at his risk. If beneficiaries come and pester him and say that they want their legacies and pressure is put on other beneficiaries to allow these anticipatory payments to be made, in my judgment it is the duty of the executor to resist any such pressure. I think it must be said that where the court has to deal with a matter under this Act the estate should be there intact. Of course, duties and debts, and that sort of thing, can be paid — there is no question about that — but no distribution to beneficiaries should be made while there is any possibility or expectation that an application under this Act will be made."

The law in Victoria says that executors do not have to distribute the estate within 12 months of the death of the deceased. This is known as the executor’s year.

After 12 months, beneficiaries may be entitled to receive interest on the value of their gifts of up to 8% in certain circumstances.

Some wills may require gifts to be held on trust until a certain event occurs (ie until a minor beneficiary reaches a certain age). In many instances the executor will become the trustee of that money and have to look after it until the specified event occurs.

In other cases, a will gift may be left in a trust for a person’s benefit, rather than being left to them in their own right. Protective trusts and special disability trusts are examples of such ongoing trusts.

Where property is the subject of ongoing trust obligations, you should discuss this with us.

Some gifts may be left as life interests only, so that the beneficiary is entitled to use the assets but is not free to dispose of them. For example:

the beneficiary who is given a life interest in a house may live in the property but cannot sell the property except in certain limited circumstances;

the beneficiary who is given a life interest in shares may have the income from a share portfolio but cannot sell the shares and take the sale proceeds.

When that beneficiary dies, the asset that was the subject of the life interest (ie, the house or shares, etc) then passes to the beneficiary who was left the “remainder” interest in the will.

What if the estate liabilities exceed the estate assets?

If there are more liabilities in the estate than assets, then the estate is insolvent. In this situation, the estate should be declared bankrupt and the remaining assets used by the trustee of the bankrupt estate to pay out the liabilities. The executor and beneficiaries would not be liable for the shortfall provided that they had not already taken any assets from the estate.

“Who pays the executor?”

An executor is entitled to be reimbursed by the estate for any amounts he or she has paid on behalf of the estate, provided they were appropriate amounts.

The executor’s role is often described as a trustee or fiduciary role. In most circumstances, where the executor is a person known to the deceased, he or she will not receive any financial benefit or payment for taking on the role. However, the executor may receive some payment for their work in the following circumstances:

if the deceased sets out in the will that the executor is entitled to be paid for his or her efforts. Usually the will states the rate of payment in terms of a percentage of the total assets and/or income of the estate;

where a gift to the executor is included in the will in lieu of the right to apply to the court for remuneration;

if all of the beneficiaries agree on an amount the executor should be paid from the estate. Beneficiaries should be encouraged to obtain independent legal advice before agreeing to such a request;

if the Supreme Court orders that the executor is entitled to be paid.

The payment to the executor is called a “commission” and in Victoria, it cannot exceed 5% of the total value of the estate assets. When a court considers whether an executor should be paid a commission it takes into account the work done by the executor as well as the responsibility and time involved, often referred to as “the pains and trouble.” Only in very rare circumstances would the court award 5%. The maximum rate of 5% is generally reserved for very complicated and time-consuming estates where the pains and trouble were extraordinary. Generally speaking, the rate of commission awarded would not exceed 3% of the total assets.

Executors wishing to receive a commission should keep extensive records of all they have done in their executorial role to justify the commission.

Investing trust funds

You have a legal duty to invest trust funds pending distribution.

If you wish us to invest all or any part of the assets of the estate, the Act requires that you must give that direction in writing (which can be by e-mail), and by all executors if there is more than one executor. You should also direct us as to the date on which you want the investment to mature (this is usually 6 months from the date of the grant of probate or letters of administration).

Paying funds to you other than in due administration of estate

If you wish us to direct us to pay all or any part of the assets of the estate to you otherwise than in the due administration of the assets of the estate, you must give that direction in writing, and by all executors if there is more than one executor.

Keeping costs down!

Here’s a hint on how to save money. You can keep costs down by contacting us by e-mail rather than by telephone. This is because the scale fees for telephone calls are very much higher than for e-mails. Some clients tell us: “If I had known it was cheaper by e-mail, I would have e-mailed you rather than telephoning you.”

CLAIMS ON ESTATE

“Can anyone claim more?”

Yes, beneficiaries under the will may make a claim for a larger share of the assets and others not mentioned in the will can make a claim for a share of the assets.

The court may order that there be a distribution of assets other than as set out in the will if the court is satisfied that the deceased had a responsibility to provide for the maintenance and support of the person claiming further provision from the estate and the deceased has failed to meet this responsibility.

In Victoria the applicant must fall within the definition of an eligible person as set out in the Administration and Probate Act 1958. Each of the following is an eligible person:

a spouse or domestic partner;

a child or adopted child or step child or someone who thought they were a child;

a former spouse or domestic partner who would have entitled to bring a family law claim but had not or was part way through proceedings;

a registered caring partner;

a grandchild;

a spouse or domestic partner of a deceased child or adopted child or step child or someone who thought they were a child, if they died within one year of the deceased;

a person who is a member of the deceased’s household (or had been and was likely to be again in the near future).

The applicant must show that the deceased had an obligation or duty to make adequate provision for them and that this was not done. There are many factors that the court will take into account when considering these types of applications. In general, the courts will look carefully at situations where children or spouses of the deceased have been left out of the will or been unfairly treated. Consideration will be given to the financial circumstances of adult children when they make a claim. In relation to an eligible person other than the spouse or children, the courts will look at whether there was a dependent relationship with the deceased and what contribution they made to the building up of the estate or the welfare of the deceased. The courts will consider any written reasons given by the deceased as to why the eligible person was left out or left less than others.

It is a complicated area of law and each matter is judged on its own facts. You should discuss the matter with us if you have any concerns or suspect that a claim may be brought on this basis.

Anyone wishing to make an application is entitled to do so within six months of the date that probate was granted. If they try to make an application after that time, special permission from the court is required.

It is prudent for the executor to hold on to some or all of the estate assets for 6 months from the date probate is granted. If the executor distributes the estate within six months of the date probate was granted and a claim is made for further provision from the estate within the six month period, then the executor may be personally liable for any amounts the court requires the estate to pay. The exception to this rule is that the executor may make a distribution to the spouse or partner or children of the deceased of all or part of their entitlement under the will for the purpose of providing for their “maintenance, support or education” without any personal liability in the event of a claim by others for provision from the estate.

An executor should not make any distribution of an estate if he or she has received written notification that someone intends to make an application to a court for further provision from the estate. The executor needs to wait three months from receiving that notice before a distribution can be made, and the distribution can only be made if the executor has received no further notice that the application has actually been made. It would be prudent for an executor who has received notice of a claim to conduct litigation searches in the Supreme Court and County Court before deciding to distribute the estate assets.

INCOME TAX

“Is there tax to be paid?”

The executor is responsible for lodging any outstanding income tax returns on behalf of the deceased where necessary. The last tax return should also contain a statement of assets and liabilities of the deceased at the date of his or her death.

The estate is also subject to income tax if it earns income, such as rent on real estate or interest on investments, and a tax return may need to be lodged on behalf of the estate. The estate should not be fully distributed until all income tax liabilities are known and accounted for.

There are no inheritance taxes or death duties in Victoria.

If property is given to beneficiaries in accordance with the will, for most transfers there will be no capital gains tax or duty payable by the estate or beneficiaries at the time. However, capital gains tax may be payable by the beneficiaries when they dispose of the property at a later date.

If assets are sold by the estate, then capital gains tax may be charged to the estate. There will be no capital gains tax on the sale of the deceased’s main residence if it is sold and the sale settles within 2 years of the date of his or her death.

Introduction

As executor, you have a number of obligations under the Tax Administration Act and the Income Tax Assessment Act:

notifying the Australian Tax Office of the death to stop the issue of any notices which may cause distress to spouses or other relatives;’

lodging previous tax returns on behalf of the deceased, if required;

lodging a “date of death” (final) personal tax return on behalf of the deceased;

applying for a trust tax file number for the deceased’s estate if trust tax returns have to be lodged in the future;

preparing and lodging trust tax returns for the deceased’s estate, if necessary;

paying tax on behalf of certain beneficiaries.

After you have been appointed executor, you should notify the Australian Taxation Office by completing the form Notification of a deceased person (NAT 74279).

1. Lodging a Final Return

After the deceased’s death, and depending on the income of the deceased, you may need to prepare and lodge an income tax return. This is the same tax return form used for all individuals, except for the inclusion of the date of death, and an additional disclosure to the Commissioner noting that it is the deceased’s final return.

You are required to lodge all outstanding tax returns up to the deceased’s date of death.

There may be a number of reasons why an income tax return for the deceased may be required. This may include:

tax has been withheld from the income earned by the deceased prior to their death;

the deceased earned taxable income exceeding the tax-free threshold;

tax has been withheld from interest or dividends because no tax file number was quoted by the deceased to the investment body;

the deceased had lodged tax returns in prior years.

If the deceased has been lodging tax returns prior to their death, you will need to submit a final tax return on behalf of the deceased. This will be the final personal tax return of the deceased with their personal tax file number. This tax return is known as the “date of death return.”

That tax return should cover the period from the previous 1 July to the date of death. For example, if the deceased’s date of death was 6 March 2016, the date of death tax return will cover the period 1 July 2015 to 6 March 2016.

A date of death return covers the period from the beginning of the income year to the date of the taxpayer’s death. Show the name of the taxpayer as THE LEGAL REPRESENTATIVE OF JOHN CITIZEN DECEASED, or similar. The return must include:

all assessable income and deductible losses or outgoings of the deceased from the start of the income year up to the date of death

a full and true statement of the assets and liabilities of the deceased at the date of death. For salary and wage earners this is only necessary if the ATO asks for it.

The return may also include:

tax agent’s fees and similar expenses incurred by you as executor: these are deductible expenses;

medical expenses incurred by the deceased taxpayer and paid by the legal personal representative: a medical expenses tax offset may be allowable for this expenditure.

You can sign the return.

The final tax return should include all assessable income derived by the deceased and all the tax-deductible expenses incurred up to the date of death.

The notice of assessment, received after the date of death return is lodged, is a formal notification that all income tax liabilities to the date of death have been satisfied where:

all the liabilities on the notice have been satisfied, or

the notice states that no tax is payable.

If the deceased has not lodged a return for several years, the last notice of assessment will serve the same purpose.

What if the income was below the deceased’s tax-free threshold?

Date of death returns may not need to be lodged for people who obviously have no taxation liability and may not have lodged tax returns for many years, such as taxpayers who were receiving only:

the age pension;

the disability support pension; or

a Department of Veterans’ Affairs (DVA) pension.

If the deceased’s income was below their tax-free threshold, and they don’t have any refundable tax credits (eg, withholding tax, imputation credits), a final tax return may not be required.

If you have determined that a final tax return is not required, you still have an obligation under the legislation to notify the Australian Taxation Office by using a “non-lodgment advice” form. You, or the deceased’s tax adviser, must complete a ‘Non-lodgment advice form’ and send it into the Australian Taxation Office. On the form, where it asks for the reason for not lodging a tax return, “DECEASED” should be printed followed by the deceased’s date of death.

2. Deceased Estate Return

A deceased estate is a trust that is automatically created when a person dies. It consists of the assets the person owned on the date of death together with any earnings from that point onwards. The assets in the deceased estate are held in trust from the date of death until the estate has been fully administered.

After the date of death, the deceased estate may receive income from various sources. A trust tax return will need to be lodged for the deceased estate if tax is payable on the income or capital gains or if tax has been withheld from that income.

A deceased estate tax return is required to be submitted for the period commencing from the date of death until the end of the income year and thereafter until the estate is fully administered. A trust income tax return of a deceased estate is a separate tax return from the final personal tax return (date of death return) of the deceased.

The net income of the deceased estate is taxed either in the hands of: ‘

the beneficiaries who are presently entitled; or

the executor.

A trust tax return may need to be lodged for each income year until the deceased estate is fully administered (all of its assets and income are distributed to the beneficiaries) and no longer deriving income.

There are special rules regarding the tax rates applicable for deceased estates, depending on how many years the deceased estate has been submitting tax returns.

For the first three tax years, the deceased estate income to which no beneficiary is presently entitled is taxed at the same rates as individuals, including the benefit of the full tax-free threshold, and excluding Medicare levy.

What if the income was below the estate’s tax-free threshold?

To work out whether or not to lodge a trust tax return for the deceased estate, refer to the reasons listed below.

You are required to lodge a return where the deceased estate:

derived income including capital gains;

has received dividends (after the date of death) and you wish to claim the franking credits;

has received income from which tax has been withheld; or

carried on a business.

Take into account only the income received by the deceased estate after the deceased’s death.

Authority to deal with the tax affairs of the deceased

You will need proof of your authority if you are to deal with the tax affairs of the deceased. Once you have been appointed as an executor of the estate we/you they should write to the ATO with details of the deceased’s:

full name;

date of birth;

date of death;

contact address, for example, your address or your tax agent’s;

tax file number, if known.

You will need to provide proof of your identity and documents such as the death certificate and the will or grant of probate.

You will need to provide proof of identity for yourself, including:

tax file number (TFN), full name, date of birth, and address;

documents, such as the death certificate and the will; or

evidence of the grant of probate or letter of administration, when it is granted — this may be some time after you lodge the deceased’s tax returns.

Once that is done, you can request the TFN of the deceased over the phone, or ask us to send it to you.

If the deceased had linked the ATO to their myGov account, their ATO Online services account will not be able to be accessed. Additionally, any ATO correspondence they received in their myGov Inbox will not be viewable.

You can lodge your completed application, with the original or certified copies of supporting documents outlined on the form, to the ATO by:

It can take up to 28 days for the ATO to update its records after it receives the form.

TFN application for a deceased estate

You can apply for a tax file number (TFN) for a deceased estate online at www.ato.gov.au. Other ways to apply are:

through your registered tax agent;

by downloading and completing the form Tax file number application for a deceased estate.

The period from the date of death to the end of the income year is covered by the first return of the deceased estate. You need to apply for a trust TFN by completing an ABN registration for companies, partnerships, trust and other organisations (NAT 2939) if an ABN is required or a Tax file number application or enquiry for a deceased estate (NAT 3236) if an ABN is not required. Show the name of the trust as THE ESTATE OF JOHN CITIZEN DECEASED or similar.

Paying tax on the income of a deceased estate

You cannot distribute the income or assets of a deceased estate until the debts of the deceased, including any outstanding tax liabilities, are determined. For taxation purposes, this requires a notice of assessment. Once a notice of assessment is issued, the trustee can deal with the assets of the deceased in accordance with the will.

A trustee can distribute some of the income or assets to beneficiaries if you are certain that the remainder of the estate is sufficient to cover any outstanding liabilities. Beneficiaries who receive payments of income are considered to be presently entitled to them and they declare them and pay tax on those amounts in their own tax returns.

Any undistributed trust income, or income accumulated in the deceased estate and not paid to or applied to the credit of beneficiaries, is treated as income to which “no beneficiary is presently entitled,” for example, where the administration of an estate is not finalised.

Tax rates applicable to a resident individual (that is, normal tax rates) are applied to the net income to which no beneficiary is presently entitled if the person died less than three years before the end of the income year.

We hope we stressed the importance of attending to the Australian Taxation Office or retaining an accountant to do so on your behalf.

Jansen Walsh & Grace are not accountants and not qualified or authorised to prepare tax returns. However, we can refer the file to a firm of accountants which specialises in deceased estates.

Your checklist

Executor checklist

Initial steps

Read the will carefully

Obtain advice from us

Identify the beneficiaries

Notify the beneficiaries of their entitlements and send a copy of the will to, at least, the residuary beneficiaries

Managing the property

Make a list of all of the assets (video recording or photographing household items is a good idea)

Prepare financial details to lodge any outstanding tax returns of the deceased

Apply for an estate tax file number

Prepare tax return for the estate

Prepare application for probate

After probate

Redeem and collect assets

Pay debts and liabilities

Wait for the expiry of the six month limitation period for family provision claims against the estate and defend the will against a challenge if it arises

Prepare estate accounts showing all money collected and paid on behalf of the estate

Attend to reimbursement of expenses incurred on behalf of the estate

Distribute estate to beneficiaries in accordance with the terms of the will

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